Thursday, May 25, 2017

The Budget Math Error

How did I miss this? This article is written two days ago by Larry Summers - you remember Larry Summers: Treasury Secretary under Clinton, ex- Harvard professor and chief economist of the World Bank.
Details of President Trump’s first budget have now been released. Much can and will be said about the dire social consequences of what is in it and the ludicrously optimistic economic assumptions it embodies. My observation is that there appears to be a logical error of the kind that would justify failing a student in an introductory economics course.

Ouch. Perhaps Trump's economic team didn't graduate from Harvard.
Apparently, the budget forecasts that U.S. economic growth will rise to 3.0 percent because of the administration’s policies — largely its tax cuts and perhaps also its regulatory policies. Fair enough if you believe in tooth fairies and ludicrous supply-side economics.
Reagan fooled us with that. You'd think we would have learned.
Then the administration asserts that it will propose revenue neutral tax cuts with the revenue neutrality coming in part because the tax cuts stimulate growth! This is an elementary double count. You can’t use the growth benefits of tax cuts once to justify an optimistic baseline and then again to claim that the tax cuts do not cost revenue. At least you cannot do so in a world of logic.
We left that world last November, Larry.
This is a mistake no serious business person would make. It appears to be the most egregious accounting error in a presidential budget in the nearly 40 years I have been tracking them.


Whether it is Secretary Mnuchin’s absurd claims about tax cuts not favoring the rich, Secretary Ross’s claim that the small squib of a deal negotiated last week with China was the greatest trade result with China in history, NEC Director Cohn's ludicrous estimate of the costs of Dodd-Frank, or today's budget, the Trump administration has not yet made a significant economic pronouncement that meets a minimal standard of competence and honesty.


I have no doubt that there are civil servants in Office of Management and Budget, the Treasury and the Council of Economics who do know better than this mistake. Were they cowed, ignored or shut out? How could the secretary of the treasury, the director of OMB and the director of the National Economic Council allow such an elementary error? I hope the press will ferret all this out.
Oh, shit. Not the press! Wait til the tRump sees this on his TV.

Of course, Larry Summers was a bankster deregulation proponent, so...

...but hey, do what you will anyway.

No comments: